The dollar fell Wednesday, as investors weighed a more hawkish Federal Reserve against uncertainties over global trade.

The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was recently down 0.1%, to 87.15.

In a statement, the Fed said it would raise interest rates by another quarter-percentage point and signaled it could lift them at a faster clip this year. Expectations of higher rates tend to make the dollar more attractive to yield-seeking investors. Wednesday’s increase, the second this year, will bring the benchmark federal-funds rate to a range between 1.75% and 2%.

The dollar shot higher after the Fed released its statement, but its gains melted away during the central bank’s press conference, when Fed Chairman
Jerome Powell
appeared to play down the risks that a tightening labor market will send inflation higher.

“If we thought inflation was going to take off, then obviously we’d be showing higher rates,” he said. Pressed on the longer-run rate forecast, he said, “We can’t be too attached to these unobserved variables.”

Investors are “still trying to figure out how to read Powell’s take on inflation,” said
Brad Bechtel,
managing director at Jefferies.

Trade concerns also weighed on the U.S. currency. The Trump administration is preparing to levy tariffs on tens of billions of dollars of Chinese goods in the coming week, perhaps as early as Friday—a move that is likely to spark heavy retaliation from Beijing.

Market participants are now looking ahead to the conclusion of the European Central Bank’s monetary-policy meeting Thursday. Investors will be awaiting signals on when the ECB plans to wind down its massive bond-buying program.